BOE Decision Proves Prescient as UK Retail Sales Tank

The Bank of England's decision to hold interest rates steady despite high inflation seems prescient in light of recent economic data. Inflation had been a major concern, but it was not spreading throughout the economy, and raising interest rates would have done little to curb oil prices, which were rising globally for reasons unrelated to monetary policy.

However, new retail sales figures released by the CBI show that consumer spending is actually weakening, with sales compared to a year ago falling to -55 in September from -48 in August. Orders compared to a year ago posted a net reading of -62, down from -29, more than doubling their previous negative value.

The data suggests that consumers are cutting back on discretionary spending, and the outlook doesn't get better either. A survey of expectations shows severe deterioration for October compared to September, with sales expected to drop to -37 in October from -22 in September, a 6.4 percentile standing.